Hospital Corporation of America

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HCA financial goals are to expand with 20% a year and keep 60% debt ratio. To retain it’s A bond rating.

The debt policy for HCA with 60-40 capital structure is hard to keep whenever they have 69-31 structure. HCA should try to maintain the 60% level with the light of the potential changes in the regulatory environment.

HCA need external finance to expand 20% a year and if they do not have a good interest rate that would cost them a lot to get a loan, that is why it would be better to go with only 50% - 60% debt ratio.

It is not that important to attach to the debt ratio, u could go higher , but the company will be more risky, also that is depend on the market and the future for the business.

HCA would need $670 million for the next 3 years to continue it’s expanding policy, that would required a good bond rate. HCA should try hard to keep its debt ratio around 50% that would give the company a good bond rate, so they would have higher credit lines from the lenders, with a low interest rate.

HCA should try to move to get more finance with equity, ( issue new stocks). That would give the company a chance to maintain the 60% debt ratio, and keep the A bond rate.

Also HCA could try to decrease leverage as retained earnings are earned, from the cash flow generated from profits could be used to replace debt capital with equity.

High leverage will create financial risk for the company.

Sameh Ghabour